In the following table, select the amount of each good that each country exports and imports In the boxes across the row marked "Trade Action," and enter each country's final consumption of each good on the line marked "Consumption." When the two countries did not specialize, the total production of corn was 23 million bushels per month, and the total production of jeans was 68 million bushels per month, and the total million pairs per month. Because of specialization, the total production of corn has increased by production of jeans has increased by million pairs per month. Because the two countries produce more corn and more jeans under specialization, each country is able to gain from trade. Calculate the gains from trade-that is, the amount by which each country has increased its consumption of each good relative to the first row of the table. In the following table, enter this difference in the boxes across the last row (marked "Increase in Consumption"). Contente Euphoria Corn Jeans Corn Jeans (Millions of bushels) (Millions of pairs) (Millions of bushels) (Millions pairs) Without Trade Production 8 48 15 20 Consumption 8 48 15 20 With Trade Production Trade action Consumption Gains from Trade Increase in Consumption

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Gains from trade are the net benefits to economic agents from increased voluntary trading with one another in economics. In technical terms, they are the increase in consumer surplus plus the increase in producer surplus as a result of lower tariffs or other trade liberalisation.
There are two kinds of trade gains:

1) Static or direct gain - Gain as a result of specialisation and exchange

2) Dynamic gain or indirect gain - PPF shift outward.

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